Laura A. Athens
The Michigan Uniform Power of Attorney Act (UPOAA), signed into law by Governor Gretchen Whitmer on November 7, 2023, took effect on July 1, 2024. Michigan has joined 30 other states in adopting this model statute. The Act replaces the prior Michigan power of attorney law, which was part of the Estates and Protected Individuals Code (EPIC.)
The UPOAA is designed to promote standardization, consistency and ease of use. The Act will help alleviate problems with enforcement previously caused by laws that varied from state to state. The Act provides the agent with broad powers while protecting the principal against abuse and fraud. It also provides the agent with reimbursement for expenses as well as reasonable compensation, unless specifically prohibited by the terms of the power of attorney.
The Michigan UPOAA contains four sections:
ARTICLE 1 sets forth general provisions, including definitions, scope of applicability, presumption of durability, execution requirements, validity of the power of attorney, agent duties and liability, reimbursement and compensation, resignation and termination of the power of attorney.
ARTICLE 2 fully describes the parameters of the general and specific grants of power and authority by the principal to the agent over various types of property, interests, claims, benefits and rights.
ARTICLE 3 contains three statutory forms: the statutory power of attorney form, agent’s acknowledgment form and certification of the validity of the power of attorney form.
ARTICLE 4 includes miscellaneous provisions about uniformity and the Act’s effect on existing powers of attorney. This article highlights some of the key provisions of the UPOAA.
Durability of the Power of Attorney
The Michigan statutory form creates a durable power of attorney. The Act changes prior Michigan law by providing that if a power of attorney is executed in compliance with statutory requirements, it will automatically be durable without any need for an affirmative statement of durability in the power of attorney.
A durable power of attorney is particularly advantageous because, unlike a general power of attorney, the agent’s authority will remain in effect upon the principal’s incapacity. This will help to ensure the principal’s wishes are followed in the event of a serious illness, debilitating injury or devastating accident. The statute defines incapacity as the inability to manage property or business affairs due to impairment in ability to receive and evaluate information or to make or communicate decisions even with assistive technology, or if missing, detained, or outside the United States and unable to return.
Statutory Forms and Legal Consultation
Arguably, the most useful aspect of the Act is the statutory forms. These forms make it possible for individuals to create a durable power of attorney without having to retain an attorney. A potential positive outcome is that fewer guardianships and conservatorships will be necessary.
The statutory power of attorney form is self-explanatory and user friendly. It includes instructions and the specific language required for a valid power of attorney. If the form is properly completed, it is enforceable.
The UPOAA encourages individuals to exercise care in using these forms that govern important rights. The Act contains cautionary language in bold print warning the principal to seek legal advice before signing the form if they have any questions about the wisdom of granting authority to the agent.
The statutory form refers to the importance of seeking legal advice or counsel six times. While the Act encourages, but does not require legal advice, legal consultation is advisable to ensure capacity and understanding, to describe the scope and options, to explain consequences of a power of attorney, and to ensure voluntary appointment by the principal and knowing acceptance by the agent. Trust is essential; once a power of attorney is in effect, there is no judicial or direct oversight of the agent's activities by anyone other than the principal.
The Act also contains an agent acknowledgement form, which the agent must sign to acknowledge they will comply with the duties to act in the principal’s best interest, in good faith, and within the scope of the authority granted. The Act also includes a third form to certify the validity of the power of attorney, which is designed to be used by an agent or attorney who represents either the principal or agent.
General and Specific Authority
ARTICLE 1 of the UPOAA describes, in detail, general and specific grants of power and authority. The statutory power of attorney form enumerates those powers. Essentially, general powers include authority over real and personal property, banking, stocks, bonds and other financial investments, insurance, annuities, litigation and claims, retirement and governmental benefits, and taxes. The form allows the principal to grant some or all the general powers to the agent.
Special powers may include authority to create, amend, revoke, or terminate an inter vivos trust; make a gift; create a joint account; create or change a beneficiary designation; waive the principal's right to be a beneficiary of a joint and survivor annuity; access the content of electronic communications; or authorize another person to exercise the authority granted under the power of attorney. The statutory power of attorney contains an explicit warning that granting the special powers would give the agent the authority to take actions, which could significantly reduce the principal’s property or change how property is distributed upon the principal’s death. The form also raises the question of whether the principal is certain that they have designated the right person to serve as agent and requires the principal to initial next to each special power granted. These additional safeguards are included due to the serious, potential consequences of granting these special powers.
Agent Duties and Liability
The agent's duties include acting in accordance with the principal's reasonable expectations, in good faith, within the scope of the authority granted; and maintaining reasonable records of receipts, disbursements, and transactions. In addition, unless the power of attorney provides otherwise, the agent must act loyally for the principal’s benefit, and with the care, competence and diligence of a prudent person, must preserve the principal’s estate and cooperate with a person with authority to make health care decisions.
The UPOAA provides for appointment of an agent, successor agents, and coagents at the option of the principal. The Act and form also contain the option for nomination of a guardian and conservator in case it becomes necessary for a court to appoint a guardian or conservator. Successor agents serve one at a time in succession. A successor serves after the original agent resigns, dies, becomes incapacitated, or is no longer qualified to serve. In contrast, coagents serve simultaneously and can exercise powers independently of one another.
An agent who acts in the best interest of the principal and exercises the care, competence, and diligence of a prudent person would not be liable solely because the agent also benefited from the act or had a conflicting interest in relation to the property or affairs of the principal.
If, however, the agent violates the UPOAA, or acts outside the authority granted in the durable power, they may be liable to the principal or the principal's successors for harm or loss, as well as any profits made by the agent related to the violations.
They also may be subject to civil or criminal penalties and responsible for reimbursement of attorney’s fees and costs paid on behalf of the principal to address the misconduct.
If the agent embezzles or wrongfully converts the principal’s property, the agent is liable for three times the value of any property that was embezzled, converted, or wrongfully withheld from the principal or the successors in interest. These provisions are intended to prevent financial abuse, neglect, exploitation, or abandonment by the agent and protect elder, disabled or otherwise vulnerable principals and their successors.
A successor or coagent may be liable for reasonably foreseeable damages caused by the misconduct of another agent if they have knowledge of a breach or imminent breach of fiduciary duty by the other agent and fail to notify the principal or take appropriate action to safeguard the principal’s interests.
Alternative Dispute Resolution
The UPOAA does not specifically mention mediation or arbitration, however, it contains several references to alternative dispute resolution. The portion of the statute addressing a general grant of authority over claims and litigation explicitly includes the agent’s power to submit a dispute to alternative dispute resolution unless the power of attorney indicates otherwise.
Mediation or arbitration could be pursued to address disputes between coagents or disputes between agents and successors in interest as well as to resolve disputes with third parties. If a principal is incapacitated, but still able to communicate their wishes, their participation in mediation or arbitration should be considered if it is feasible and would be helpful in addressing issues in the case.
If a principal wants to limit alternative dispute resolution to a particular process, for example, mediation only, then the principal would need to include that direction under the special instructions portion of the power of attorney.
Execution of the Power of Attorney
Under the Act, signing the power of attorney before two witnesses, other than the principal and agent, is sufficient to make the power of attorney effective. However, signing before a notary is encouraged because it creates a legal presumption that the power of attorney contains a genuine signature. This enables a third party to accept the power of attorney in good faith and presume that the principal’s signature is genuine as long as the third party does not have actual knowledge indicating that the signature is not authentic. A third party is required to accept an acknowledged power of attorney unless that third party requests a certification, translation, or opinion of counsel.
The Act discourages third parties, such as banks and other financial institutions, from wrongfully refusing to accept an acknowledged power of attorney and asking for a legal opinion when the circumstances do not warrant such a request. If a court later finds that the reason for the request is frivolous, the third party is subject to liability for attorney’s fees and costs incurred in providing the requested opinion. These provisions are designed to protect families from having to comply with unnecessary requests for new powers of attorney or compelled use of the financial institution’s form.
Powers not Granted in a Power of Attorney
The UPOAA does not apply to patient advocate designations, which are still governed by EPIC. A patient advocate is given authority to exercise powers concerning care, custody, and medical or mental health treatment decisions for the individual who granted the patient advocate designation. The Act also does not apply to delegation of a parent or guardian’s authority over a minor child or ward.
Termination
A durable power of attorney ends upon the principal’s revocation, death of the principal, or by court order. The principal may revoke the power of attorney by providing a written notice of revocation to the agent and any third party who may rely on the power of attorney. The revocation is effective when the notice is received by the agent or the third party.
Existing Powers of Attorney
The Act clearly provides that an existing power of attorney remains valid as long as it was properly executed at the time it was signed. It may be prudent, however, to re-execute the power of attorney and have it notarized to obtain the additional protection under the UPOAA of an acknowledged power of attorney.
Conclusion
The new Michigan UPOAA provides clarity, uniformity and ease of use. Adopting the Act is a positive development in the estate planning process and promotes the use of powers of attorney by allowing individuals to create their own power of attorney, appoint someone they trust to manage their affairs if they become incapacitated, and ensure their wishes are followed. The Act simultaneously protects vulnerable individuals by including several cautionary statements about the importance of the rights assigned and by encouraging legal consultation.
—————
Laura A. Athens is an attorney, mediator, facilitator and arbitrator in Michigan with over 30 years of combined litigation and alternative dispute resolution (ADR) experience. She currently devotes her practice exclusively to ADR.
Athens is an associate of Professional Resolution Experts of Michigan, LLC (PREMi).
The UPOAA is designed to promote standardization, consistency and ease of use. The Act will help alleviate problems with enforcement previously caused by laws that varied from state to state. The Act provides the agent with broad powers while protecting the principal against abuse and fraud. It also provides the agent with reimbursement for expenses as well as reasonable compensation, unless specifically prohibited by the terms of the power of attorney.
The Michigan UPOAA contains four sections:
ARTICLE 1 sets forth general provisions, including definitions, scope of applicability, presumption of durability, execution requirements, validity of the power of attorney, agent duties and liability, reimbursement and compensation, resignation and termination of the power of attorney.
ARTICLE 2 fully describes the parameters of the general and specific grants of power and authority by the principal to the agent over various types of property, interests, claims, benefits and rights.
ARTICLE 3 contains three statutory forms: the statutory power of attorney form, agent’s acknowledgment form and certification of the validity of the power of attorney form.
ARTICLE 4 includes miscellaneous provisions about uniformity and the Act’s effect on existing powers of attorney. This article highlights some of the key provisions of the UPOAA.
Durability of the Power of Attorney
The Michigan statutory form creates a durable power of attorney. The Act changes prior Michigan law by providing that if a power of attorney is executed in compliance with statutory requirements, it will automatically be durable without any need for an affirmative statement of durability in the power of attorney.
A durable power of attorney is particularly advantageous because, unlike a general power of attorney, the agent’s authority will remain in effect upon the principal’s incapacity. This will help to ensure the principal’s wishes are followed in the event of a serious illness, debilitating injury or devastating accident. The statute defines incapacity as the inability to manage property or business affairs due to impairment in ability to receive and evaluate information or to make or communicate decisions even with assistive technology, or if missing, detained, or outside the United States and unable to return.
Statutory Forms and Legal Consultation
Arguably, the most useful aspect of the Act is the statutory forms. These forms make it possible for individuals to create a durable power of attorney without having to retain an attorney. A potential positive outcome is that fewer guardianships and conservatorships will be necessary.
The statutory power of attorney form is self-explanatory and user friendly. It includes instructions and the specific language required for a valid power of attorney. If the form is properly completed, it is enforceable.
The UPOAA encourages individuals to exercise care in using these forms that govern important rights. The Act contains cautionary language in bold print warning the principal to seek legal advice before signing the form if they have any questions about the wisdom of granting authority to the agent.
The statutory form refers to the importance of seeking legal advice or counsel six times. While the Act encourages, but does not require legal advice, legal consultation is advisable to ensure capacity and understanding, to describe the scope and options, to explain consequences of a power of attorney, and to ensure voluntary appointment by the principal and knowing acceptance by the agent. Trust is essential; once a power of attorney is in effect, there is no judicial or direct oversight of the agent's activities by anyone other than the principal.
The Act also contains an agent acknowledgement form, which the agent must sign to acknowledge they will comply with the duties to act in the principal’s best interest, in good faith, and within the scope of the authority granted. The Act also includes a third form to certify the validity of the power of attorney, which is designed to be used by an agent or attorney who represents either the principal or agent.
General and Specific Authority
ARTICLE 1 of the UPOAA describes, in detail, general and specific grants of power and authority. The statutory power of attorney form enumerates those powers. Essentially, general powers include authority over real and personal property, banking, stocks, bonds and other financial investments, insurance, annuities, litigation and claims, retirement and governmental benefits, and taxes. The form allows the principal to grant some or all the general powers to the agent.
Special powers may include authority to create, amend, revoke, or terminate an inter vivos trust; make a gift; create a joint account; create or change a beneficiary designation; waive the principal's right to be a beneficiary of a joint and survivor annuity; access the content of electronic communications; or authorize another person to exercise the authority granted under the power of attorney. The statutory power of attorney contains an explicit warning that granting the special powers would give the agent the authority to take actions, which could significantly reduce the principal’s property or change how property is distributed upon the principal’s death. The form also raises the question of whether the principal is certain that they have designated the right person to serve as agent and requires the principal to initial next to each special power granted. These additional safeguards are included due to the serious, potential consequences of granting these special powers.
Agent Duties and Liability
The agent's duties include acting in accordance with the principal's reasonable expectations, in good faith, within the scope of the authority granted; and maintaining reasonable records of receipts, disbursements, and transactions. In addition, unless the power of attorney provides otherwise, the agent must act loyally for the principal’s benefit, and with the care, competence and diligence of a prudent person, must preserve the principal’s estate and cooperate with a person with authority to make health care decisions.
The UPOAA provides for appointment of an agent, successor agents, and coagents at the option of the principal. The Act and form also contain the option for nomination of a guardian and conservator in case it becomes necessary for a court to appoint a guardian or conservator. Successor agents serve one at a time in succession. A successor serves after the original agent resigns, dies, becomes incapacitated, or is no longer qualified to serve. In contrast, coagents serve simultaneously and can exercise powers independently of one another.
An agent who acts in the best interest of the principal and exercises the care, competence, and diligence of a prudent person would not be liable solely because the agent also benefited from the act or had a conflicting interest in relation to the property or affairs of the principal.
If, however, the agent violates the UPOAA, or acts outside the authority granted in the durable power, they may be liable to the principal or the principal's successors for harm or loss, as well as any profits made by the agent related to the violations.
They also may be subject to civil or criminal penalties and responsible for reimbursement of attorney’s fees and costs paid on behalf of the principal to address the misconduct.
If the agent embezzles or wrongfully converts the principal’s property, the agent is liable for three times the value of any property that was embezzled, converted, or wrongfully withheld from the principal or the successors in interest. These provisions are intended to prevent financial abuse, neglect, exploitation, or abandonment by the agent and protect elder, disabled or otherwise vulnerable principals and their successors.
A successor or coagent may be liable for reasonably foreseeable damages caused by the misconduct of another agent if they have knowledge of a breach or imminent breach of fiduciary duty by the other agent and fail to notify the principal or take appropriate action to safeguard the principal’s interests.
Alternative Dispute Resolution
The UPOAA does not specifically mention mediation or arbitration, however, it contains several references to alternative dispute resolution. The portion of the statute addressing a general grant of authority over claims and litigation explicitly includes the agent’s power to submit a dispute to alternative dispute resolution unless the power of attorney indicates otherwise.
Mediation or arbitration could be pursued to address disputes between coagents or disputes between agents and successors in interest as well as to resolve disputes with third parties. If a principal is incapacitated, but still able to communicate their wishes, their participation in mediation or arbitration should be considered if it is feasible and would be helpful in addressing issues in the case.
If a principal wants to limit alternative dispute resolution to a particular process, for example, mediation only, then the principal would need to include that direction under the special instructions portion of the power of attorney.
Execution of the Power of Attorney
Under the Act, signing the power of attorney before two witnesses, other than the principal and agent, is sufficient to make the power of attorney effective. However, signing before a notary is encouraged because it creates a legal presumption that the power of attorney contains a genuine signature. This enables a third party to accept the power of attorney in good faith and presume that the principal’s signature is genuine as long as the third party does not have actual knowledge indicating that the signature is not authentic. A third party is required to accept an acknowledged power of attorney unless that third party requests a certification, translation, or opinion of counsel.
The Act discourages third parties, such as banks and other financial institutions, from wrongfully refusing to accept an acknowledged power of attorney and asking for a legal opinion when the circumstances do not warrant such a request. If a court later finds that the reason for the request is frivolous, the third party is subject to liability for attorney’s fees and costs incurred in providing the requested opinion. These provisions are designed to protect families from having to comply with unnecessary requests for new powers of attorney or compelled use of the financial institution’s form.
Powers not Granted in a Power of Attorney
The UPOAA does not apply to patient advocate designations, which are still governed by EPIC. A patient advocate is given authority to exercise powers concerning care, custody, and medical or mental health treatment decisions for the individual who granted the patient advocate designation. The Act also does not apply to delegation of a parent or guardian’s authority over a minor child or ward.
Termination
A durable power of attorney ends upon the principal’s revocation, death of the principal, or by court order. The principal may revoke the power of attorney by providing a written notice of revocation to the agent and any third party who may rely on the power of attorney. The revocation is effective when the notice is received by the agent or the third party.
Existing Powers of Attorney
The Act clearly provides that an existing power of attorney remains valid as long as it was properly executed at the time it was signed. It may be prudent, however, to re-execute the power of attorney and have it notarized to obtain the additional protection under the UPOAA of an acknowledged power of attorney.
Conclusion
The new Michigan UPOAA provides clarity, uniformity and ease of use. Adopting the Act is a positive development in the estate planning process and promotes the use of powers of attorney by allowing individuals to create their own power of attorney, appoint someone they trust to manage their affairs if they become incapacitated, and ensure their wishes are followed. The Act simultaneously protects vulnerable individuals by including several cautionary statements about the importance of the rights assigned and by encouraging legal consultation.
—————
Laura A. Athens is an attorney, mediator, facilitator and arbitrator in Michigan with over 30 years of combined litigation and alternative dispute resolution (ADR) experience. She currently devotes her practice exclusively to ADR.
Athens is an associate of Professional Resolution Experts of Michigan, LLC (PREMi).
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